Dayton MGT 490 - CapSim Introduction
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CapSim Simulation IntroductionWhat is CapSim and why do we use it in MGT490?More CapSim Background…Slide 4Welcome to your New Company! Teams, Segments & ProductsThe Basics: SensorsThe Sensor IndustryThe Market SegmentsThe Market Segments: Buying Criteria ImportanceThe Segments & The Perceptual MapSlide 11The Perceptual Map: Segment Drift and Ideal SpotsSlide 13Company Functional Areas You Will ManageThe two most important, critical decisions you can makeGeneric StrategiesSlide 17Performance Criteria: Your Team Must DeterminePoints to Consider for Your StrategyPractice RoundsNext Step…CapSim Simulation IntroductionDiane M. Sullivan, Ph.D., 2011Some Sections Modified from Management Simulations, Inc.Some Sections Modified from Gentner (2008)What is CapSim and why do we use it in MGT490?•Strategy essentially deals with making long-term decisions –Decisions involve multiple functional areas of the firm–Decisions have long-term effects on the firm’s profitability•CapSim allows us to practice making strategic decisions in a risk free environment—a simulation/gameMore CapSim Background…•The simulation is used by companies worldwide to train managers and executives•You and your teammates are the executives of CapSim: a $100 million sensor manufacturer. •Your roles in the company are:–To formulate, articulate, and execute a strategy–To organize your team to support your strategy–To make coherent, functional decisions reinforcing your strategy•Each round is the equivalent of one year in the life of the firm•All teams start with identical positions•We start with 4 practice rounds•8 “real” rounds follow the practice roundsSEC ANNOUNCES BREAKUP OF MONOPLOYFOR IMMEDIATE RELEASEThe SEC, took dramatic action today by breaking up the monolithic corporation Sensors, Inc. In a statement to the press, the SEC outlined the reason and the outcome of this move.“We cannot allow monopolies of this sort to impact an entire industry! The customers that utilize these sensors are being held hostage.”“Effective immediately Sensors, Inc. will be dissolved into the Andrews, Baldwin, Chester, Digby, Erie and Ferris companies.”CapSim ContextWelcome to your New Company! Teams, Segments & ProductsEach industry includes five product segments: Andrews Baldwin Chester Digby Erie Ferris Traditional Low End High End Performance Size Able Baker Cake Daze Eat Fast Acre Bead Cedar Dell Ebb Feat Adam Bid Cid Dixie Echo Fist Aft Bold Coat Dot Edge Foam Agape Buddy Cure Dune Egg Fume There are 6 teams in the industry:You have been assigned to one of the following industries: C44763 (3pm) C44766 (4:30pm)30 initial products in the industryYou are in competition with the other 5 teams in your industryThe Basics: Sensors•What’s a sensor?–A device that receives an input and relays information or takes an action •Example: a thermometer or a thermostat–How many types of thermometers can you think of?–What applications may they be used for?–Along what characteristics do they differ?The Sensor Industry•CapSim’s “sensor” market is similar to microprocessors:–High growth industry (9-20% annually in different segments)–Barriers to entry – 6 firms in a market, never any new entrants to the game–Highly competitive – 6 identically endowed teams with no one being given an initial advantage–Somewhat turbulent – the market demands more every year (better performance, lower costs)–There are multiple “sub-markets” or segments that exist within the industryThe Market Segments•5 “sub-markets” or segments in the sensor industry–Traditional, low-end, high-end, size, and performance–Customers have different buying criteria relative to:1. Performance: customer perceptions of how well the product performs2. Size: the product's dimensions and weight3. Reliability: expressed as Mean Time Between Failure (MTBF)4. Price: price of product5. Age: age of product–In each segment, the relative importance of these criteria are differentPositioningThe Market Segments: Buying Criteria Importance•Traditional Importance:1. Age 47%2. Price 23%3. Positioning 21%4. MTBF 9%•Low-end Importance:1. Price 53%2. Age 24%3. Positioning 16%4. MTBF 7%•High-end Importance:1. Positioning 43%2. Age 29%3. MTBF 19%4. Price 9%•Performance Importance:1. MTBF 43%2. Positioning 29%3. Price 19%4. Age 9%•Size Importance:1. Positioning 43%2. Age 29%3. MTBF 19%4. Price 9%The Segments & The Perceptual MapRough CutFine CutPositioning•Just beyond fine cut, appeal drops 1%•½ way between fine and rough cuts appeal drops 50%•Just inside rough cut, appeal drops 99%Round 8  Round 1Fine Cut Criteria Changes Over Rounds Example: Traditional SegmentImportant Points to Remember:•Price ranges decline $0.50 in each round•Positioning ideal spots change each round and are segment specific•Age preferences always remain constant•MTBF ranges always remain constant•Growth rates always remains constantThe Perceptual Map: Segment Drift and Ideal SpotsSelling Your Products:Visualizing the Rough & Fine CutCompany Functional Areas You Will Manage•R & D: –Revise product attributes•Positioning (size and performance)•Reliability•Age–Introduce new products•Production: –Add capacity–Automation–Labor costs–Inventory costs•Marketing: –Set prices–Set spending on promotions (Awareness) –Set spending on sales force (Accessibility)•Finance: –Issue and retire stocks and bonds–Set credit policies –Dividend policy–Manage cash flowThe two most important, critical decisions you can make1. Properly organize your team, creating accountabilities and reporting assignments•Suggestion 1: Organize your team by creating product or segment managers, then •Suggestion 2: Elect a CEO who is responsible for the overall direction of the organization (e.g., strategic coherence), ensuring uploads are complete, etc.2. Articulate, and define a coherent strategy•Coherence means individual decisions (e.g. finance and marketing) reinforce the overall strategyGeneric Strategies•There are 3-6 distinct strategies that work very well in this class–Be sure to look through your CapSim tutorials and handbooks for help with this•You should choose performance measurements that align with each of the strategies•Each strategy requires giving up something (Porter’s “tradeoffs”)–You can’t make one product that meets


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